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Tip toe through the tulips

Half a millennia ago, the wealthiest Dutch proved that lots of money does not lead to intelligent investing. The hot button item way back then was the era’s gold boom and bust. In fact, for a time, the innocuous little tulip bulb was worth far more than gold. What started as a mild interest in a nice looking but short-lived springtime flower quickly turned into a stampede of guilders.

The wealthiest families in what was one of the wealthiest nations in the world started a slow walk into a market that soon turned into an all-out free-for-all that bid the price of a single bulb from merely expensive to incredibly insane. At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman - more than half a million dollars in today’s money. After the boom came the inevitable bust. In 1636 you could make a fortune gambling on tulip futures. A year later, caught on the backside of what might have been one of the first pyramid schemes? You lost your shorts.

Are plant- or cell-based meats today’s tulips; delicate spring flowers that wilt under the heat of summer? They were given a major boost by some of the world’s richest men. Virgin air’s Richard Branson and Microsoft’s Bill Gates have invested millions. For instance, Gates dropped $64 million on start-up Beyond Meat last year.

Beyond Meat, recently seduced and abandoned by investor Tyson Foods, made the strongest market debut so far this year, surging 163% from an initial IPO price of $25 a share. The stock now has a market value of nearly $4 billion but the U.S. meat substitute market, with at least two dozen potential competitors, is worth just $1.44 billion, according to Euromonitor International data.

One of the biggest players in the scramble to supply ‘unmeat’ meat, Impossible Foods, had successfully supplied small amounts to a few chains including Houlihan’s, Red Robin and White Castle. The imitation meat kingpin stumbled hard, though, when presented with its first major big market opportunity. After a successful market test with Burger King in St. Louis, Mo., the burger chain announced a nationwide rollout of the Impossible Whopper. Somebody somewhere along the line forgot to check supply. Sufficient patties were not to be had. I.F. Management apologized for the shortages but it left many curious consumers with a bad taste in their mouths – not caused by the product.

“I had an opportunity to sample the White Castle product without any extras – just the meat and bread. It was awful. I prayed for mustard, ketchup, a pickle, anything to help disguise the taste.” Well-known meat industry observer.

Beyond Meat had similar struggles in 2017 and 2018 and promised it will use some of the proceeds from its IPO to invest in its manufacturing facilities. It’s an ongoing problem mentioned by Christine McCracken, executive director of animal protein with Rabobank, during a ‘Hot Issues’ presentation at the recent Animal Ag Alliance’s Stakeholders Summit in Kansas City, Mo.
She thought none of the approximately 27 players in the imitation meat sector had the current capacity to quickly become a major player in the retail meat case, regardless of demand. “Ramping up, especially with the significant investment money at hand, could be done relatively soon, though” she said.

Bottom line: Imitation meat products are one of the few growth items in a flat retail environment. The center of the store, where you find boxed cereals, canned soups, tuna in pouches and other consumer packaged goods is a dead zone; no growth, no excitement, little profit. It’s the store perimeter where perishables are found that real money can be made in an industry that struggles to make pennies. If consumer demand looks like it will support ‘unmeat’ products, supermarkets will hustle to highlight them, making plant- and cell-based meats hot and permanent meat case fixtures.